U.S. manufacturing backlog: High-tech will be the first main force

Louisville, Kentucky is a mid-sized city with a population of more than 700,000. This year, one thing boiled the entire city.

General Electric of the United States opened a factory in the city and recruited 1,000 workers in the first place. Although the starting salary of the workers was 13 US dollars per hour, which was lower than the previous standard, a news came out and a resume came in. The company received a total of 16,000 resumes. U.S. media have exclaimed: "Random birds are home."

Weary bird homes

This year, the city of Louisville finally ushered in the spring of manufacturing. General Electric opened a new factory in the United States, which was separated from GM's opening of the first factory in 50 years. This time, the factory mainly produces refrigerator freezers and water heaters. The bottom freezer production line was originally located in Mexico.

At the end of last month, General Electric once again announced that it will add more than 380 workers to the factory's bottom freezer production line this summer.

This is only part of GE's $800 million plan to invest in 2014 in Louisville. In response, the local government rejoiced that not only did the governor personally attend the opening ceremony, the City of Louisville was more than happy.

"We are really happy that we are happy with their progress," said Mayor Greg Fischer.

The mayor wasn’t just talking about it. For increased local employment, General Electric received a total of $37 million in awards in Kentucky and Louisville. In addition, the company also received a federal tax reduction of 24.8 million US dollars.

Company spokesperson Kim Fremont told reporters that the move back to the production line is to facilitate the integration of human resources.

“Our strategy is to build an elite center around refrigeration products. To achieve this, we need to move manufacturing operations to the same place. There, engineers, industry designers, and others responsible for overall innovation, quality, and manufacturing operations are Together to ensure high quality and cost competitiveness."

In addition, for large U.S. companies, holding high on "Made in the United States" has become a necessary means of market PR in the context of economic depression. At a related press conference, Google mentioned that the new wireless home media player Nexus Q is designed and manufactured entirely in the United States. It is priced at US$299, which is much higher than competitors such as Apple or Roku.

Similar to it, Whirlpool also opened a new factory in Cleveland, Tennessee, USA. This $200 million investment will add 130 jobs. Jeff Fertig, the company’s chairman, once again reiterated: “Our 80% of the products we sell in the United States are made in the United States. No manufacturer of appliances can approach this commitment to employment in the United States.”

U.S. Reindustrialization Plan

The return of U.S. manufacturing is part of the U.S. reindustrialization plan. The 2008 financial crisis was considered by experts to have its roots in the "de-industrialization" of the 1980s. "Deindustrialization" has caused the "hollowing" of U.S. industry and the rising unemployment rate. In the past decade or so, the U.S. industrial production value and its growth rate have rapidly declined; the proportion of manufacturing employment in the total number of employees fell from 15% to less than 10% in the decade, and the U.S. manufacturing lost during 1979 to 1993. The number of jobs is 2.3 million.

At the G20 meeting in September 2009, after Obama proposed a "sustainable and balanced growth framework" proposal, the United States introduced a series of economic recovery boosting policies based on balanced growth. The most significant and iconic is the "US Manufacturing Industry Promotion Act" (hereinafter referred to as the "Act") that came into force on August 11, 2010. The bill aims to help U.S. manufacturing companies reduce production costs, increase international competitiveness, boost physical manufacturing, and create more jobs.

In this context, many high-tech industries in the United States have returned to their nests. A recent survey by the Boston Consulting Group (BCG) reveals that more than one-third of manufacturing executives headquartered in the United States plan to switch production from China back to the United States, or are considering this practice. These companies’ annual sales The amount is more than 1 billion US dollars.

Among them, 67% of rubber and plastic products enterprises, 42% of machinery manufacturing enterprises, 41% of electronic manufacturing enterprises, 40% of computer manufacturing enterprises, and 35% of metal products enterprises stated that they expect to relocate enterprises from China to the United States.

Affecting China's smaller

Although the return of the U.S. manufacturing industry has only begun, U.S. media have begun to report in succession to celebrate this gratifying phenomenon. However, the reporter learned that the phenomenon of returning to the nest actually has little effect on China.

Last year, Caterpillar moved its entire assembly business from Mexico back to the United States. However, its spokesman Jim Dugan told reporters that their overall strategy in China is to increase investment.

“We have not withdrawn any production from China. We are investing more in China and many new factories are under construction.” Dugan said, “Almost everything we produce in China is sold in China.”

It is understood that Caterpillar announced in March this year to increase the production capacity of hydraulic excavators in Xuzhou production base, and plans to begin production of wheeled excavators in early 2014.

Whirlpool relocated the assembly business of the KitchenAid handheld agitator back to the United States last year. Company news spokesman Christie Vonelel clarified to reporters that the reason for the relocation was mainly the need for market regulation.

“Many parts of the hand-held mixer, including the engine, are still manufactured in China. The plastic parts produced in the United States will be manufactured using equipment purchased in China.” Wagner said, “This product was sold in the United States and moved back to the assembly business.” In the United States, Whirlpool is able to respond to customer needs faster. For example, if a color suddenly becomes popular, the company can quickly provide the market with a blender of this color."

It is understood that Whirlpool announced in March this year that it will jointly establish a sales company with Suning.

General Electric also recently reiterated the importance of manufacturing outsourcing.

“We must find a place where we can develop and manufacture the best products and services at the lowest cost, wherever it is. So, we will continue to outsource futures and manufacturing.” General Electric President Jeffrey Jermatt In the Harvard Business Review, it was mentioned: “This is not a bad thing for the United States. In fact, thousands of American jobs exist because we have the ability to compete globally.”

The reporter also learned that it is often small companies that have now moved the entire production line back to the United States. U.S. media has repeatedly cited a company called Light Saving Technology, which recently moved back from China to the entire production line. The reporter saw on Linkedin that the company is a small company of 10 to 25 people. The reporter tried to call the company's website, but the number was already empty.

Another company, Suarez Corp., is a company that manufactures space heaters. After moving from China to the United States, they added 250 jobs to the United States. However, due to the oversupply of the market, they recently resigned about half of their workers.

Cost determines fate

Last year, General Electric succeeded in reaching an agreement with the company’s union. The union must accept a lower starting salary for workers, and the company promised to hire more workers. Last fall, the company just announced that 450 new jobs were less than an hour and received 6,000 resumes.

Many experts believe that one of the important reasons why U.S. companies, especially small companies, have moved production lines back to the United States is that the price of labor in China has risen and the price of U.S. labor has fallen. BCG is obviously very optimistic about the future of US manufacturing. According to a report released by the company, in ordinary Chinese factories, workers’ wages and benefits are growing at a rate of 15% to 20% per year, which will lead to labor costs in China relative to the U.S. low-cost states. The advantage is now 55%. Reduced to 39% in 2015.

And D. Becker, director of the US Center for Economic and Policy Research, told reporters that in China, workers’ wages are about 2 to 3 US dollars per hour, compared with less than 1 US dollar a few years ago, and in the United States, about every hour. 18 to 20 US dollars. The BCG mentioned that by 2015, the wages of Chinese workers will be 4.41 US dollars per hour, while the United States is 26.06 US dollars.

“Although this is still a big gap, but there is a big advantage in producing in the United States. If the company manufactures and sells in the United States, the transportation costs are low and a lot of travel time is saved. In addition, many products must now Rapidly entering the market, if the production process is short, the competitive advantage will be greatly improved." Becker said.

In addition, many experts believe that with the rise in energy prices, the rise in transportation costs has also led to the withdrawal of companies with smaller production scales. Finally, high-tech, automotive components, household appliances, and other areas will be the main force of the first batch back to the nest due to high quality requirements.

It is understood that in the United States, manufacturing activity expanded for the 34th consecutive month in May, but the pace of manufacturing activity expansion slowed during the month. The report shows that the United States manufacturing purchasing managers index for the month was 53.5, indicating that the US manufacturing industry is expanding. From the perspective of the industry, in the 18 manufacturing industries, 13 industries including machinery, computers and electronic products expanded in the same month.

In the end, Becker believes that the current U.S. manufacturing back to the nest can only be said to be in its infancy. There may be a peak in the next 3 to 4 years. Boston Consulting Group also believes that the return of manufacturing will bring 2 million to 3 million jobs in the United States. However, the return of U.S. companies cannot change China’s status as a major manufacturing country.